JSW Steel Ltd. (JSWSTEEL) - Chairman Speech

Company chairman speech

Sajjan Jindal Chairman & Managing Director

Dear Shareholders

The Will to Win' is a relentless pursuit of excellence and of doing better eachday. At JSW Steel we have built our business on this principle which enables us toovercome any challenges or constraints that come our way just like we did in 2016-17.

I am delighted to share with you that JSW Steel delivered strong operationalperformance in FY 2016-17 and recorded its highest ever production sales consolidatedEBITDA and profit after tax.

An all-time high performance

2016-17 saw JSW Steel achieve many benchmarks and report our best-ever results. At 15.8million tonnes our crude steel production was the highest ever and so were the totalsales of 14.7 million tonnes. This included value-added steel sales of 5.06 milliontonnes that represents an increase of 17%.

We reported our best ever EBITDA at Rs. 12174 crores which is almost double of theprevious year's figure. Standalone EBITDA Margin at Rs. 7800 per tonne reflects ourhealthy operational performance. Our Profit After Tax was also the highest ever at Rs.3467 crores a testimony to our efficientoperations and robust cost management.As a result our Board proposed a dividend of 225% the highest ever payout.

A robust Balance Sheet

Our performance also helped us strengthen our balance sheet with significantimprovement in our key ratios. Net debt to EBITDA improved to 3.41 times from 6.39 timesand net debt to equity improved to 1.85 times from 2.18 times.

One of the key reasons for our strong balance sheet is our ability to set upcapacities both greenfield and brownfield or make acquisitions at globally competitiveinvestment costs of around $550 per tonne. This has resulted in lesser interest &depreciation to service and provide adequate cash accrual to sustain our growth planswithout diluting financial policies of the Company to maintain net debt to EBITDA at 3.75& net debt to Equity at 1.75 times. That explains why at 14.8% our Return on CapitalEmployed (ROCE) is one among the top 5 steel companies globally.

A promising future

Our numbers for 2016-17 set the stage for an even better performance in the currentyear. We have provided a crude steel volume guidance 16.5 million tonnes at a 4% growthwhile the growth in sales volume is guided 5% higher at 15.5 million tonnes. We willcontinue to focus on increasing the share of the value-added products basket in ouroverall top line. JSW Steel will also scout for organic and inorganic growth opportunitiesto expand its footprint.

Integrating backward. Innovating forward.

The Government has put in place a transparent mechanism for allocation of mineralresources through auction. We participated in auctions of iron ore mines in Karnataka andwon 5 mines in October 2016 which have estimated reserves of ~111mn tonnes which meetsapproximately 20% of the total requirement at Vijayanagar. The Company also secured onecoking coal mine in auction in the State of Jharkhand. We are striving to commence miningat the earliest while we continue to bid for more mines both iron ore & coal.

We are investing in people and sustainable practices to remain among the world's bestrun steel companies. To make ourselves future proof we have recently embarked on adigitisation journey to do a full digital makeover plan and improve efficiency in themanufacturing processes and reduce costs.

India with its stable government strong reforms rising infrastructure spend &robust consumption demand will provide a platform to reach per capita steel consumption of160 kg & total steel capacity of 300 Million tonnes by 2030 as envisaged by NationalSteel Policy 2017. Also trade remedial measures taken by the Government of India willprovide level playing field to this strategic industry to revive investment cycle &create employment opportunities.

The budgetary allocation of Rs. 4 trillion for infrastructure water and gas pipelinesrenewable energy and road sector should fuel enhanced economic activity and as a resultsteel demand. Together with this a normal monsoon will also augur well for the economy.Therefore we expect the steel industry to grow at 5-6% over the medium term.

At JSW Steel we will play a key role in supporting the above policy initiativesincluding the `Make in India' initiative. We have already outlined a capex programme of ~Rs. 26800 crores to expand overall steelmaking capacity to 23 MTPA by Mar 2020 increaseour downstream flat steel capacity ~7MTPA by Sep 2019 along with a few other strategicprojects. These key projects will be set-up at a very competitive capital cost and willimprove our return ratios. We have embarked on these expansion plans considering thegrowth in domestic demand and the likely steel deficit in the domestic market as no majorinvestments in steel sector is contemplated. These capital expenditure plans have beenoutlined to achieve backward and forward integration capacity expansion and costreduction. We remain committed to maintain our net debt to EBITDA of 3.75 and net debt toequity of 1.75 while these capex programmes are executed over the next three years.

In Conclusion

Our Will to Win has sustained across cycles and I am confident that it will serve uswell at this time of great optimism. I am grateful to our team for their sustained effortsin making JSW Steel a leading steel company in the world. I would also like to thank allour stakeholders Board Bankers and the Government for the support and assistanceprovided throughout our journey.